Former chairman of FBN Holdings, Oba Otudeko is reported to be behind the over four billion shares of FBNH that were transacted on the NGX on Thursday, July 6th, 2023.
Nairametrics confirmed this from traders on the Exchange with knowledge of the transaction.
The trade has ratcheted up allegations over the validity of the trades considering that no single shareholder hitherto officially owned as many shares.
Cardinal Stone and Rencap handled the transaction which shocked capital market operators considering the size of the deal.
Nairametrics reported that trade is valued at about N85.5 billion and is one of the largest single trades recorded for the stock this year.
A press release explaining the trade is yet to be released on the NGX as of when this article was written.
Deal sparks of speculations
FBNH has about 35.8 billion shares outstanding as of December 2022 audited accounts, thus around 12.2% of the shares were traded.
- The Bank’s last audited accounts place billionaire investor, Femi Otedola as the highest shareholder of the bank with a direct and indirect holding of 5.57%.
- Thus market analysts are pondering how a sale of this magnitude may have been consummated on the assumption that no shareholder had enough shares to sell not to talk of the 12.2% that was traded.
What we have learnt
Shares sold to proxies: A source with knowledge of the transaction informed Nairametrics indicate the sale was to Barbican Securities Ltd.
- “The shares were sold to Barbican Capital Ltd and kept with FBN securities, UBA capital, and Royal Asset Management. It was also moved from the account of 26 sellers”; the source who did not want to be named confirmed.
Likely Motivation for sale: Another reliable source who pleaded anonymity suggests this may be connected to the pending Ecobank appeal at the Supreme Court over the implementation of liquidation proceedings against Honeywell Plc, of which Oba Otudeko was the majority owner.
- Honeywell has since been acquired by Flour Mills Plc in a deal announced in 2022.
- Ecobank had warned Flour Mills to steer clear, but the deal went ahead.
Why Proxies? Another source who did not want to be mentioned by name postulated that the sale via proxies may have been motivated by the need to mask ownership.
- “When you want to avoid a court judgement on your asset, especially shares, you do not disclose all your holdings. Doing that might expose your assets and can be taken over. To further make it difficult for the shares to be acquired, you can spread it across proxies who are listed as shareholders in other names.”
On why so many shares were traded despite not being previously disclosed as significant shareholding, another expert explained that this is often done to avoid scrutiny from the central bank.
- “If you are a shareholder of a bank and you take insider loans from the bank, you must not take more than 1% of the shareholders funds unimpaired by losses.”
- “The central bank frowns at this and if they find out, the directors or shareholders will need to repay the loans or in the alternative, the bank will be forced to increase its shareholders funds.”
CBN Guidelines: According to Section 3 of the CBN’s Prudential Guidelines for Deposit Money Banks
- “A director or a significant shareholder shall not borrow more than 1 percent of shareholders’ funds unimpaired by losses.”
- It also states that “the aggregate credit facilities to all insiders and their related parties shall not exceed 10 percent of shareholders’ funds.”
This provision is for any director or shareholder with a stake of 5% or above raising concerns over market anomalies taking place on the NGX.
Regulators at the Security and Exchange Commission are also thought to be monitoring this transaction.
Checks by Nairametrics on the website of the NGX reveal no official statement is yet to be made by the bank holding company or anyone.
- However, we understand a press release will be issued soon by the bank as soon as they receive notification of the trade from the parties involved.
- Deals like this are reported on the NGX as part of its insider dealings rules.
What traders are saying
Former President of the Chartered Institute of Brokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in an exclusive chat with Nairametrics stated that FBN Holdings is one of the most liquid stocks in the nation’s stock market.
- “If it is Oba Otudeko, I think he is just consolidating his shares, it is not a transfer between two parties. He already has a position in the bank and nothing is going to change significantly in the bank.
- It was the largest single transaction in the secondary market in 5 years in terms of value. There will be no significant change in the bank if it is Oba Otudeko because he already had a seat in the bank and he was a former chairman of the financial institution”.
The Executive Vice Chairman of Hicap Securities Limited, Mr. David Adonri said that the over 4 billion units of FBN Holdings Plc shares have been traded on the NGX on Thursday was a strategic investment or divestment.
He noted that it may not be connected with the struggle for the soul of the organization.
- “Strategic investors are taking positions to acquire controlling interest in the company. This means that the board of the bank may be worried because membership of the board can be changed at any time. This is because a strategic investor may be acquiring to own the bank. This can affect the stability of policies that the directors may be formulating for the management of the bank on day-to-day operations,” Adonri said.
About 30 million shares of the stock have been traded as of when this article was written. The bank’s share price is currently N20.20.
This story has been updated to include new information
Oba Otudeko.is perhaps planning to stage a comeback into the Board of First Bank. The starting point was for him to consolidate all his shareholdings scathered in various forms into one house. Obviously it is a large volume transaction. Hence it was reported to NGX before it was executed. NGX approved the day it was executed. It is a smart move by Mr Otudeko. Scathering shareholdings in 26 firms is unwieldy. It is wise to bring them.under one house.